The large distinction at issue here is the contrast between rational actor models of the social world, in which the actor makes choices within a thin set of context-independent decision rules, and social actor models, in which the actor is largely driven by a context-defined set of scripts as he/she makes choices. The contrast is sometimes illustrated by contrasting neoclassical economic models of the market with substantivist models along the lines of Karl Polanyi's The Great Transformation: The Political and Economic Origins of Our Time, and it links to the debate in economic anthropology between formalists and substantivists.

Read it at Understanding SocietySocial embeddednessby Daniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn, and faculty associate at the Institute for Social Research and the Center for Chinese Studies at the University of Michigan

The plan works in a fairly simple manner: In the UK's case, the BofE is lending short-term government bills to banks, which use the securities as collateral to borrow money from the central bank at a rock-bottom rate — about 0.25 percent — and then make loans.

Banks can borrow up to 5 percent of the value of their existing loan books, and the loans from the BofE are four years in duration.

The program is similar to something the Fed tried, with considerable success, during the financial crisis that exploded in 2008....The Fed's program was called the Term Asset-Backed Securities Loan Facility and allowed primary dealers to borrow Treasury bills from the Fed in exchange for depositing collateral.

The only thing that the article misses that I would improve on is the political compass, which is based on a vertical axis of authoritarian versus and libertarian preference, and a horizontal axis of right (conservative) and left (liberal). There are probably more left libertarians than right.

In fact, if the Fed were primarily concerned with government borrowing costs, it's obvious that the easiest course of action would be to do nothing, let everything collapse into deflation, and watch the world pile into US Treasuries, sending yields even lower than where they are now.They haven't done this. The Fed is trying to inflate the economy and that means higher rates. The myth that the Fed is motivated by public sector debts is nonsense.

...Voter fraud simply isn’t a problem in this country. Studies have definitively debunked the voter fraud myth time and again....By contrast, there is ample evidence that voter ID laws inhibit voting, particularly among minorities and the poor — two major demographic segments that tend to vote Democratic.

And that’s hardly a coincidence. Consider the recent bragging by the Pennsylvania House Republican leader that his state’s voter ID bill “is gonna allow Governor Romney to win the state of Pennsylvania.”

This is not simply another gratuitously partisan act by the GOP. This is an attack on the very notion of democracy. The voter ID push, along with intimidation of voter registration groups and purges of voter rolls have only one goal: blocking legitimate but probably Democratic voters from exercising their constitutional rights. It is a poll tax with a new twist.

And the pursuit of this goal ostensibly in the name of voter fraud is an outrageous deception that only works if the press is too timid to call it what it really is.

Came across this wiki on what appears to be Marx's 19th century concept of "Commodity Fetishism":

...commodity fetishism is the transformation of human relations, derived from the trading of commodities in the market, whereby the social relationships among people are expressed with objectified relationships, between the commodities and the money used to buy them. Commodity fetishism makes the subjective, abstract aspects of economic value into objective, real things that people believe have intrinsic value. The transformation is achieved by means of reification — the symbolic metamorphosis of an abstract exchange-value into a concrete object, a commodity with intrinsic value, in and of itself....

Yiccchhhhh! Sicko! Sorry to say that imo, present day people who seem to have some sort of irrational attraction to gold as a "standard" by which we could base our monetary system, look like they may be suffering from this corrupt condition.

A recent post based on a Hebrew Scripture from the Prophet Isaiah comes to mind:

Behold Me rousing against them the Medes, who are not accounting silver, And gold - they are not delighting in it.(Isaiah 13:17)

Then there is perhaps the more widely known Greek Scripture from the Apostle Paul (who sometimes quoted Isaiah) to Timothy :

For a root of all of the evils is the fondness for money, which some, craving, were led astray from the faith and try themselves on all sides with much pain. (1 Tim 6:9-10)

The Greek word which is normally translated here "fondness for money" or "love of money" isphilarguria, or "love of silver", or perhaps a "fetish for silver" in recent English? Yeeccchhh!

Then there is the Lord Himself, upon commissioning His disciples to be solely going to the house of Israel with His authority:

"Gratuitously you got; gratuitously be giving. You should not be acquiring gold, nor yet silver, nor yet copper in your girdles,..." (Mat 10:8-9)

Here he orders His disciples to NOT take any form of payment in or possess any or all of the three naturally occurring metal commodities that oddly went on to occupy Column 11 of the Periodic Table of the Elements. Sounds like He had their best interests in mind and wasn't taking any chances lest perhaps they would develop what Marx may have identified over 1,800 years later as a "commodity fetish", and become corrupted via the human interface with any of these metals.... but apparently only when they are used as an exogenous form of "money" or otherwise an object of delight.

NHS among developed world's most efficient health systems, says study. Report in the Journal of the Royal Society of Medicine finds health service second only to Ireland for cost-effectiveness....Among the 17 countries considered, the United States healthcare system was among the least efficient and effective....

Looking at elderly patients, the difference was even more stark with the best performers – Ireland, the UK and New Zealand – having health systems that were three times more effective and efficient than the worst – Switzerland, Portugal and the US....Read it at The Guardian (UK)

Pritchard points out that even Adam Smith, the Scottish economist and father of market-based ideology, thought the state was "probably better" at health and education.

Sunday, July 29, 2012

Student loan debt is now the next great bubble, threatening the U.S. economy as the mortgage crisis did. The NACBA [National Association of Consumer Bankruptcy Attorneys] released a study and calls student loan debt the next financial crisis, on the level of the mortgage crisis.

This is probably the least important Presidential election since the 1950s. As an experienced political hand told me, the two candidates are speaking not to the voters, but to the big money. They hold the same views, pursue the same policies, and are backed by similar interests. Mitt Romney implemented Obamacare in Massachusetts, or Obama￼ implemented Romneycare nationally. Both are pro-choice or anti-choice as political needs change, both tend to be hawkish on foreign policy, both favor tax cuts for businesses, and both believe deeply in a corrupt technocratic establishment.So while the election lumbers on like the death rattles of the wounded animal known American democracy, no one on either side is asking what the plan is for the next term. For Obama, his team is going into rooms of donors and shouting “Supreme Court”, while mumbling something about bipartisanship and $4 trillion, or Simpson-Bowles. What this means is that term two of the Obama White House will be organized around cutting entitlements.

Component momentum in a system comes as no surprise at all within biology or system theory, or even psychology or anthropology.

From other system perspectives, runaway rent-seeking habits are one specific that falls under the more general heading of institutional momentum. Other names are phenotypic persistence, principal of prior plausibility, etc, etc ... or just random habits unrestrained.

The deeper issue is why the group momentum of such habits isn't recognized, diverted & shaped to other purposes sooner. That comes down to failure at group-wide, situational awareness, followed by failure to automatically trigger appropriate checks & balances in a complex system - a topic well discussed by the framers of our Constitution.

In small tribes, daily or weekly group-wide council discussions address this group awareness requirement. However, given our population size, no current media process parses all our distributed observations fast enough.

That leaves one pondering how far off track we really are, and what the recovery steps are.

Just when we need to be distributing enough resources & time to continually improve the quality of our distributed decision-making abilities ... we've instead gone off the rails. Our policy decision-making habits are already so concentrated that our population-wide, self-regulation gap may be widening beyond control. Worse, our distributed situational awareness may have lost ability to reconnect. Is the probability of recovery already insignificant? How would we know? Can that gap be estimated quantitatively?

Rampant rent seeking is a symptom of distributed disconnects, & failure to evolve checks & balances as fast as our options are expanding. As a nation, culture or system, we're distracted, and it no longer matters what the distractions are. The core problem is that we can't parse our options fast enough to optimize how we explore them. The result is random policy drift by elites reconstituting Central Planning by any other name.

We need indirection, and the communication throughput to capitalize on best options that some will inevitably stumble upon before all will. It's no longer a question of if HP needs to know that HP knows. Rather, we need to know how quickly HP needs to know what HP knows. There's no other way to drive continuous improvements in group agility.

How WOULD we drive continuous improvement in group agility? Group practice? When was the last time YOU acted like an owner of your democracy?

Every day, there are always many things we should start doing differently. Yet if we don't actually start, it just won't matter what we would'a, could'a, should'a done.

Report of a conversation between Lars and Paul Davidson on the philosophical underpinning of probability and its relevance in economics and finance.

Keynes and Knight both asserted uncertainty but their concept of it were different. Keynes asserted ontological non-ergodicity, whereas Knight assumed ontological ergodicity and asserted only epistemological non-ergodicity.

Lars and Paul Davidson explore the implications of this distinctions and come down on the side of Keynes.

These distinctions are key in understanding the fundamental difference between the mainstream and Post Keynesianism.

(P.S. Non-economists may be surprised that I haven't said which textbook I would recommend. That's because it doesn't really matter much. They are all fairly similar in coverage and treatment. And they are almost all good, in my opinion.)

Nick: "(P.S. Non-economists may be surprised that I haven't said which textbook I would recommend. That's because it doesn't really matter much. They are all fairly similar in coverage and treatment. And they are almost all good, in my opinion.)"

Like the ones that teach the money multiplier? :o

BTW, Lorie Tarshis's The Elements of Economics (1947) can be downloaded free here.

Keynes before Samuelson et al mangled him.

Now my thoughts on the matter of introductions.

I think that there is a problem here that has been identified by cognitive scientists, and it's widely used commercially in advertising and marketing. It's called anchor bias.

The first exposure to something creates and anchor, which is why first impressions are so important in life. If one is exposed to wrong ideas first, then it will be more difficult to shake them later. It's a matter of neural pathways. One neural pathways are opened, they create biases against other pathways, since information flows more easily (efficiently) through pathways that have been opened previously.

Anchoring is closely associated with confirmation bias. People tend to seek views that confirm already held opinions. Information is processed quickly to qualify candidates and reject those which conflict with already held views.
So, yes, which textbook one studies first can make a huge difference in how one approaches a subject.

My field is philosophy, and I entered grad school with a lot of cognitive biases that it took me several years to overcome. There is no way that reading an introductory philosophy texts would have helped me to avoid this problem, and the fact that I was coming out of a life-long Catholic education certainly influenced by views and my approach.

There is no introductory book in philosophy that can possibly inform a student of the field in one reading. The issues are complex and the historical debate over the most basic issues still rages indecisively. There are not "answers." There are methods for formulating and evaluating rationales, but there is no overarching criteria as there are in math and natural science, where the criteria are proof or "pedigree" and empirical evidence or "warrant" respectively. These criteria only apply loosely in life and social sciences, since they are non-ergodic, reflexive, and qualitative.

I would suggest rather beginning with a history of philosophy that surveys the field in terms of its development instead of a text. Then one would see that philosophy does not provide answers, like quantitative subjects dealing the the natural world. But even here, all histories of philosophy approach the subject from a particular point of view.

Moreover, just about all philosophy texts contain readings from the great thinkers that shaped the field. One can only learn philosophy by observing what the greats actually did. Texts which summarize and simplify problems are rather useless other than as reminders after one has already studied the material deeply.

Economics is similar. To get the drift of economics, one needs to understand the history of economics and the history of social and political thought as well, since they are closely intertwined. Here all again, all histories are composed from a point of view, and previous economists are viewed through that lens.

The honest way to teach economics is to admitted that it is not a science like physics nor a method like math, but rather a spin-off from social and political philosophy. As such, economic does not and cannot provide precies answers to most issues in political economy, and economic models in abstraction are much too simple to fit the complex world in which we live. They serve as aids to thought. When they claim to be solutions, they exceed their bounds as models.

Many if not most people that visit to economic blogs are interested in economics in relation to policy, not economics per se. They want to know how economics informs the political debate over policy formulation based on a rationale rather than only ideology. The task of economists is to illumine this honestly, not making claims that cannot be substantiated.

The economics debate should be over "good" versus "bad" economics rather than schools or personalities contending. Non-economists that visit blogs want to see a good case made for a position and see that position challenged by informed opponents. This is the way that informed electorates come to better political choices based on understanding and analysis of issues. Economic policy is not the only important matter with respect to policy either. Voters also want to see a comprehensive approach to policy, not a piecemeal one that ignores consequences in related matters.

Now, new evidence suggests that even microcredit was not protected from the greed that characterises modern international finance.

Two recent studies show that microfinance was simply another profit making scheme for global private finance corporations, such as the Deutsche Bank, Citigroup, and Standard Chartered, who started pouring money into microcredit initiatives.

In his book, ‘Confessions of a Microfinance Heretic’, released Jul. 9, former investment banker Hugh Sinclair claims that such banks and funds use microcredit, through local operators, to charge usurious interest rates – of up to 200 percent – on even the smallest loans.

The point is that more than 90 percent of the rise in the deficit relative to pre-crisis projections is related directly to the crisis — and probably that’s true of the other bit too, although it’s harder to show.

By working to prevent an all out collapse of the EMU, Draghi is merely taking the necessary actions to maintain his position. If Spain or other European countries must “suffer from a decade of recessions with unemployment over 20%” in order to implement the desired structural reforms than so be it. Whether or not that outcome is politically feasible remains an open question, but I have my doubts. Draghi was not the first to claim “it will be enough" and won’t be the last to make that claim either.

The not so hidden agenda. The race in the West — Europe, the UK, and the US — the work force of the developed world to compete at the same level of wages and benefits as the emerging world is on. The belief is that wages and benefits in developed countries will fall as they rise in the emerging world, splitting the difference. The good news — outsourcing no longer a threat to employment in the developed world. The bad news — falling standard of living and rising inequality as the global economy heads toward a world of have's and have-not's in a neoliberal "paradise."

They actually think that this is workable politically. I suspect they realize it is not possible without political repression. So get ready for soft fascism.

Just as policy direction leads to totalitarian communism as the extreme on the left, so too does it lead to institutional fascism as the extreme on the right.

Is this the last gasp of royalty & class-base Central Planning?Didn't anyone learn that oligarchy can't compete with open societies? This is just sitting in the road, waiting to get run over.(And no, China is NOT yet an open society, but some nation worldwide might easily create one. It's happened before, you know.)

The relevant points are VERY simple.

1) Fiat currency is directly backed by public initiative, and the two are irrevocably linked.

A fiat currency system means currency supply is dynamically linked to transaction rates, and all currency used/created/destroyed to denominate ongoing cash or credit/debit transactions is guaranteed, or "backed" by the issuing government. In short, fiat currency is ultimately backed by public initiative.

In credit-based transactions, short term currency is both created & destroyed as credit is given and debits repaid. Hence, the only source of extra currency supply for personal savings is currency created de novo by public issuer spending (Treasury) and NOT clawed back as taxes.

2) Hence, any attempt to arbitrarily limit growth of a fiat currency supply is an arbitrary limit placed on distributed public initiative.

Have populations - growing or static - run out of insanely great ADDITIONAL things to invent & do? Until they do, they need a growing & distributed currency supply automatically able to denominate all distributed transactions that expression of distributed public initiative requires.

3) Discussion of where to direct public initiative will never cease - and can always be improved - but there is NEVER any point in arbitrarily limiting public initiative, since options worth exploring are exposed only by initial actions. That's the Traveling Entrepreneur Task.

There's no going back, except by public suicide - which is illegal for individuals ... but not for whole republics? The only way for a nation to be all it can be is to get going & explore emerging options. Sitting home & foregoing initiative won't do it.

Every government official promoting public austerity is embracing assisted republic-suicide and thereby endorsing Kevorkian at scale. Spend the money to drown out their BS, then find something better to do than nothing.

Read it at Scientific American The Joker’s Wild: On the Ecology of Gun Violence in America
By Eric Michael Johnson
Eric Michael Johnson has a Master's degree in Evolutionary Anthropology focusing on great ape behavioral ecology. He is currently a doctoral student in the history of science at University of British Columbia looking at the interplay between evolutionary biology and politics.

It's the culture, stupid.

In a culture that canonizes pursuit of self-interest and "doing God's will" (Lloyd Blankfein), what does anyone expect other than primate behavior?

I should make it clear that this is still in testing phase, so expect the unexpected! It is an ongoing project and is still missing some basic parts. Nonetheless the core functionality is ready to be used and will hopefully help people stay up to date with discussions on MNE and NEP.

The book is a response to critics of heterodox economics, mostly friendly critics, who suggest that heterodox economics should change its ways in order to be more respectable and to achieve more pre-eminence. The critics include J. Barkley Rosser, David Colander, John B. Davis, Giuseppe Fontana, Robert Garnett, Bill Gerrard and Richard C. Holt.

Friday, July 27, 2012

Former Florida Republican Party Chair Jim Greer testified in a lawsuit filed against his former party that “whack-a-do, right-wing crazies” wanted to suppress the black vote through Voter ID and tactics like current state Gov. Rick Scott’s efforts to purge voter rolls, according to reporting in the the Tampa Bay Times on Thursday.

“I was upset because the political consultants and staff were talking about voter suppression and keeping blacks from voting. It had been one of those days,” he testified in the 630-page affidavit that spans two days of deposition about a fundraising meeting with party general counsel Jason Gonzalez, political consultant Jim Rimes and Eric Eikenberg, Crist’s chief of staff. Rimes denies the discussion concerned voter suppression to the Times, and Eikenberg did nto return the paper’s phone calls.

Greer claimed that the 2010 criminal fraud charges filed against him and other Republicans were part of internal party power scheming designed to push out him and former Florida Gov. Charlie Crist, among others.

Another fool about to be parted from his money. Where do they find these people? Not only is it dumb financially; betting against the US is also toying with political suicide betting against the US.

Republican Josh Mandel, the former Ohio congressman and State Treasurer who is running against Sen. Sherrod Brown (D-OH) to represent Ohio in the Senate, has positioned himself and his wife financially to reap a significant profit if the U.S. government fails to raise the debt ceiling and defaults on its loans, according to Think Progress. Mandel has campaigned on refusing to raise the debt ceiling, a move which he opposed when it came to a vote last year.

Oh, and did I mention conflict of interest?

And lest anyone forget:

House Majority Leader Rep. Eric Cantor (R-VA)came under fire last year for similar financial entanglements. It was revealed that the, too, was betting against the U.S. Treasury while publicly agitating against raising the debt ceiling, a position that many consider to be a profound conflict of interest.

You can see why everyone was so worried. The last time Britain was bailed out by the IMF in 1976, the primary structural deficit was "just" 4 per cent and national debt to GDP was by today's standards a very comfortable 53pc. Today's budget deficit is much higher, with overall debt expected to rise to nearly 80pc, according the last Office for Budget Responsibility forecasts.

Even now, it's hard to fault the analysis, yet it misses a number of vitally important points. Most important of all, it's handy to have your own currency. This more or less eliminates default risk, if only because the government can simply print the money to honour its debts. And that's precisely what it has been doing with QE, depressing bond yields in the process.

To the extent that there was capital flight, it has been countered by the Bank of England. These tools have not been available to eurozone periphery countries, which have in effect been borrowing in a foreign currency – the euro. For highly indebted nations, this raises the possibility of default from negligible to probable.

Yet the analysis also reflects a fundamental misunderstanding of the nature of money, which I have to admit to fully grasping only quite recently myself. Interest rates as reflected in government bond prices are only a reflection of the level of economic activity. When the economy is growing strongly, money changes hands with high frequency, so there is a consequent demand for cash. To satisfy this demand for liquidity, money is withdrawn from bonds, which are in essence just cash locked up for a set period of time. The demand for cash reduces the demand for bonds, causing interest rates to rise.

Conversely, in periods of low economic activity, such as right now, the velocity of money and therefore the demand for cash falls. Money instead gets parked in bonds, causing interest rates to fall. All this is just a complicated way of saying that when households and companies spend and invest less, they save more and money gets parked in bonds instead.

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

The role of Investment in Profit Generation1. Investment in a Capitalist Monetary Economy

Morons at ZeroHedge providing evidence that they do not know the difference between a stock and a flow, distance and velocity, a speedometer and an odometer, US government sector and non-government sector credit, etc...

Simon Patten recalled in 1912 that his generation of American economists – most of whom studied in Germany in the 1870s – were taught that John Stuart Mill’s 1848 Principles of Political Economy was the high-water mark of classical thought. However, Mill’s reformist philosophy turned out to be “not a goal but a half-way house” toward the Progressive Era’s reforms. Mill was “a thinker becoming a socialist without seeing what the change really meant,” Patten concluded. “The Nineteenth Century epoch ends not with the theories of Mill but with the more logical systems of Karl Marx and Henry George.[1] But the classical approach to political economy continued to evolve, above all through Thorstein Veblen.

Like Marx and George, Veblen’s ideas threatened what he called the “vested interests.” What made his analysis so disturbing was what he retained from the past. Classical political economy had used the labor theory of value to isolate the elements of price that had no counterpart in necessary costs of production. Economic rent – the excess of price over this “real cost” – is unearned income. It is an overhead charge for access to land, minerals or other natural resources, bank credit or other basic needs that are monopolized.

This concept of unearned income as an unnecessary element of price led Veblen to focus on what now is called financial engineering, speculation and debt leveraging. The perception that a rising proportion of income and wealth is an unearned “free lunch” formed the take-off point for Veblen to put real estate and financial scheming at the center of his analysis, at a time when mainstream economists were dropping these areas of concern.

Veblen’s exclusion from today’s curriculum is part of the reaction against classical political economy’s program of social reform. By the time he began to publish in the 1890s, academic economics was in the throes of a counter-revolution sponsored by large landholders, bankers and monopolists denying that there was any such thing as unearned income.[2] The new post-classical mainstream accepted existing property rights and privileges as a “given.” In contrast to Veblen’s argument that the economy was all about organizing predatory schemes, this approach culminated in Milton Friedman’s Chicago School defense the pro-rentier argument: “There is no such thing as a free lunch.”

This illumines J. M. Keynes call to "euthanize the rentier," which many consider to be outrageous. Hudson shows how mainstream economics is propaganda for rent-seeking and rentierism disguised as "growth."

For the first time since the Great Depression, middle-class families have been losing ground for more than a decade. They, and the poor, have struggled particularly badly since the financial crisis led to a global recession in 2008. The idea that living standards inevitably improve from one generation to the next is under threat. Many of the bedrock assumptions of American culture — about work, progress, fairness and optimism — are being shaken.

Against the backdrop of the U.S. Holocaust Memorial Museum, a panel of United States government officials and experts called for stronger methods to prevent modern-day genocides and mass atrocities, particularly in the case of Syria.

Secretary of State Hillary Clinton, the highest-ranking government official at the panel Tuesday, held in cooperation with the Council on Foreign Relations and CNN, addressed the mass killings of Syrian citizens by President Bashar al-Assad. She defended the administration’s decision not to directly intervene in Syria by force, but said that nevertheless, the administration is taking steps to address the situation there.

“We are increasing our efforts to assist the opposition,” she said about the Syrian rebels. “We know that the sooner it ends, the less violence there will be, and the less chance there is for extremism to take hold.”

In a poll of 1,000 U.S. citizens released Tuesday, conducted by the polling firm Penn Schoen Berland in conjunction with the panel, 78 percent of those surveyed support the U.S. taking military action to stop genocide or mass atrocities.

QE1 worked because it was in the midst of wrenching crisis. QE2 failed, despite what the Fed’s research shows. Twist 1 has failed. Twist 2 is failing. When 70% of the economy is in a balance sheet recession and the growth rate for 18 quarters in row has been at less than 1% at an average annual rate, consumers are telling you something. They want to pay down debt and rebuild saving and all of the monetary stimulus in the world is not going to change what is a perfectly rational response. So the idea that the Fed is going to step in and save the day, it has not worked in the past except during the depths of the crisis and i give them credit for that.

Former Mormon Miles Kimball speculates on where Mitt stands in relation to Mormon social and economic principles and how this would influence his approach to governing, in particular with respect to social programs and economic policy. Good primer for anyone not up on Mormon principles. This is a balanced presentation by a former believer who respects the belief but no longer holds it. No "magic underwear."

Worth reprinting far & wide.
This all got briefly forgotten in the rush to capitalize on .. er loot, after .. the shattering of Glass Steagall.

The truth can't set anyone free if it is deliberately archived, unused.

[Note: they even sent goods & news back in time on the 2nd day! :) ]

---------- Forwarded message ----------
From: Warren Mosler:

Found this on the net in the PK archives. Shows MMT was on it well before this date.

Feel free to distribute

To: PKT Academics
Re: Bretton Woods Conference
Confirmed attendance includes senior staff from Deutchebank,
Credit Suisse, J.P. Morgan, Banker's Trust, Salomon Bros,
Lehman Bros, Harvard Management, III, Petrus, Paine Webber,
Paribas, and BZW. A keynote speaker will be Professor Charles
Goodhart from the LSE. Bernard Connolly will be the historian.
Speakers for each topic are currently being arranged.
There is currently room for two academic representatives.
Please contact me at mosler@xxxxxxxx if you have interest.
A FRAMEWORK FOR ECONOMIC ANALYSIS
An Invitational Conference
Bretton Woods, New Hampshire
June 12-15, 1996
The purpose of this conference is to bring together a selected
group of portfolio managers, analysts, researchers
traders, and academics who have a common understanding
of monetary operations.
The objective of this conference is to achieve agreement on the use
of a common conceptual framework for undertaking
contemporary macroeconomic analysis.
Portfolio managers in attendance are responsible for well over
$50 billion in assets. The economists and analysts from the
international dealer community represent some of the world?s
largest and most sophisticated fixed income trading and sales
operations.
We believe that this group has the potential to establish an international
standard for the presentation and analysis of economic data.
Several of the fundamentals are Post Keynesian...
Deposit money is endogenous
Central Banks set short term rates exogenously
Deposits exist solely as the result of loans
Extension of these fundamentals includes...
Internal sovereign debt functions as interest
rate support
Taxes create a demand for the goverment's
currency
Fiat currency is defined exogenously
Conference Moderator........Warren B. Mosler
Wednesday, June 12, 1996
11:30 AM Welcome and Introduction
12:00 PM Luncheon
12:30 PM History of the Awareness of Monetary Operations
Charles Goodheart
MONETARY OPERATIONS
1:00 PM Review of the Fundamentals of Monetary Operations
1:30 PM Monetary Policy Options
MACROECONOMIC FUNDAMENTALS
2:00 PM The function of Government Securities
2:30 PM Currency Definition
3:00 PM Fiscal Policy Options and Implications
EXTERNAL DEBT
3:30 PM Review of Current Conditions
4:00 PM Macro-economic Implications
4:30 PM World Bank, IMF Policy Implications
6:00 PM Hor?s d?ouvres
7:00 PM Dinner
THURSDAY, JUNE 13
ESTABLISHING THE FRAMEWORK
9:00 AM Integrating Foreign Trade, Investment, Fiscal and Monetary
Policy
10:00 AM Full Employment, Zero Inflation Model
11:30 AM Lunch
RAMIFICATIONS OF MONETARY UNION
1:00 PM Current Political Situation
Bernard Connolly
2:00 PM Maastricht Fiscal Criteria Implications
3:00 PM Post 1999 Credit Implications
3:30 PM Functionality of the Euro
4:30 PM Drafting a Consensus
6:00 PM Hor?s d?Ouvres
7:00 PM Dinner
FRIDAY, JUNE 14, 1995
Review and Discussion
Warren B. Mosler
Director of Economic Analysis
III Finance
See "Soft Currency Economics:"
http://inca.gate.net/~mosler/softecon.html

Just thought I'd check in and see how much of our debt we've "paid back" so far this fiscal year. Let's see...hmmm...well, turns out it's now up to $54 TRILLION. And that was in the past 10 months.

And with absolutely no problem whatsoever. The world didn't end. Interest rates didn't spike up (they're actually at record lows...AGAIN), the dollar went up, the economy is still growing, there's no hyperinflation, gold is down, commodities are down. What else? It's all good.

We don't have money? Can't pay for Social Security for our seniors? Health care? Education? Infrastructure? Basic research? Jobs for the unemployed?

What a joke. We have all the money we need and an abundance of goods and services to make and distribute. It's religion that keeps us from doing it. The proof is right here in these numbers that folks at Treasury and the Fed all understand.

How else does he imagine a fiat currency system works? Agile exploration of national policy options is not counterfeiting, it's adaptation & survival.

Statements like F. Beard's miss the point completely. Truth is that an increasingly complex national economy demands increasingly agile & complex policy decisions. There's a time element to agility. Making an increasingly complex system increasingly agile requires making all operations increasingly dynamic - while ALSO independently tightening tolerance limits on ALL our increasingly distributed processes.

That's the only way we can explore our options as fast as they keep expanding.

Throughout history, the slow have always been easily daunted, and left not believing that progress is possible. However, the very existence of history refutes them, immediately & utterly.

The sad part? That we're even continuing a discussion with the F. Beard's of the world. Must we all also be left behind in the dustbin of history, dragged down by the slow & left behind? As usual, it's a policy choice. Gentlepeople, start your decision engines! In a complex, dynamic culture such as ours, all distributed decision-making sums to a survive-or-not outcome in each, fleeting context.

We have to choose to embrace the future & move forward - RAPIDLY - or submit and relegate our children as well as ourselves to being left behind with the Luddites.

It's your choice, and this is the last year it matters. Maybe the last month.

ps: Policy displays many analogies to sport. Both require agility in competitive situations, seconds count, "losing" habits acquire their own institutional momentum, and the glory goes to those unafraid to seize new opportunities ... by embracing new, more dynamic methods. So why is there a whole field of sports kinetics, while we have no comparative field of Policy Kinetics?

For example, it's common to hear economists & politicians say "I don't deal with operations." Have you EVER heard a sports coach say "I don't deal with fundamentals?" Coaches or leaders in any other setting are rapidly fired if they only draw up plays and don't worry about execution.

What the heck has happened to our economics, general policy and especially fiscal policy staff? They're all making the one mistake Napoleon noted as terminal: "paint an imaginary picture of a situation and accept it as real." In short, they've abandoned the adaptive yoke linking theory & practice, imagination and reality. Theory is something you diversify to excess, and then select from - but NEVER SETTLE ON! The only purpose of theory is to compare to operations. Yet here we are, in the USA, in the 21st century ... idly sitting by while our own policy twits say with impunity "I don't do operations."

Fine. We don't hire them! That's the only survival option. When we have that many schizophrenic thinkers at large, YOU and you alone must select to NOT vote them into either legislative or teaching positions. It's your choice, and you must select as though it matters. Because it does.

Isaiah 13 is a prophesy related to the events surrounding God's destruction of Babylon. Intro:

1 Load of Babylon which was perceived by Isaiah, the son of Amoz.

The chapter then proceeds to provide some details concerning the earthly environment during the time of Babylon's destruction. Picking it up in verse 15:

15 Everyone found shall be stabbed, and everyone gathered up shall fall by the sword.

Skipping over some more of the gory details, it is then revealed that God will use the Medes to enact His will of destruction upon Babylon. But why the Medes? What sets Mede apart from Babylon?

God's use of the Medes as His tool of destruction and the characteristics that He used to differentiate the Mede from Babylon are revealed in verse 17:

17 Behold Me rousing against them the Medes, who are not accounting silver,And gold - they are not delighting in it.

The verse reveals that the Medes were NOT "accounting" in silver, or as MMT might say, the Mede was not 'running their spreadsheet', or monetary system in a unit of "accounting" based on exogenous weight measures of silver. Also revealed is that the Medes did not "delight in gold".

The implication is that Babylon was, in contrast to the Medes, operating a monetary system based on exogenous weight measures of silver, and was delighted in gold. Two "precious" metals both in Column 11 of today's periodic table. Many humans in our era today, at least over the last century or so, advocate a policy for use of either of these two metals as an exogenous material "standard" against which we should base our contemporary monetary systems.

So this is interesting, as it doesn't look like it worked out too well for Babylon as compared to how the Medes were able to be roused by God using perhaps a system of state currency via endogenous "money".

The implication of this Hebrew scripture is clear in that at least during the era of Babylon's demise, a state that constrained it's fiscal authority by limiting it to how much silver it could obtain, and foolishly expended real output and resources on the errand of obtaining the metal gold in order to simply delight in it's presence, would be vulnerable to destruction. The prophet continues:

19 And it comes that Babylon, the stateliest of kingdoms, The beauty, the pomp of the Chaldeans, shall be as the overturning of Sodom and Gomorrah by the Alueim.20 It shall not be indwelt permanently, not shall anyone tabernacle there further, for generation after generation, Nor shall the Arabian tent there, nor shepherds recline their flocks there.21 Yet the animals of arid spaces will recline there, and their homes will be full of their uproar.

What lends this view some credence is the sluggish productivity growth of the pre-1914 period. This suggests that free markets on their own do not unleash rapid productivity improvements.If this line of thinking is anywhere near-correct, then a serious recovery in productivity requires big political change.

Layne invited me to participate in an online interview with Korean heterodox economist Ha Joon Chang, using Skype in my own home office in Chiang Mai, Thailand.

The topics are the current economic crisis, East Asia and ASEAN, global governance, climate change and the future.Ha Joon Chang is a Reader in Economics at Cambridge University. He is the author of ’23 Things They Don’t Tell You About Capitalism’ and ‘Bad Samaritans.’ He specializes in the role of the state in economics, industrial policy and technlogy policy.

Ya think? Doesn't that mean that the goal is to have EVERYONE employed, working at providing either goods or services that their their compatriots want & need?

That's what happens among all the cells in an organism, e.g. a human, or even a tree. Isn't that what should occur for all the humans in an efficiently organized nation?

To do that, we need to work together, openly, and constantly innovate. Especially, we need innovation in our methods for working together, openly. Total coordination = optimally distributed decision-making.

European media, political leaders, and the citizenry are bashing bankers again, overtly calling them at best accomplices of numerous illegal activities, at worst downright criminals.

The best example of this new wave of anger against bankers is the use of the portmanteau word “bankster” (a combination of banker and gangster), which has become commonplace in media, even in non English-speaking countries.

The term, first coined in the 1930s during the Great Depression and which resurfaced in British media in 2009, appeared on the front page of the French daily Libération on Jul. 18.

Political leaders critical of banks have so far refrained from using the word but everyone else has been having a field day with it.In a short white paper on banks’ policies released Jul. 21, the head of Germany’s leading opposition Social Democratic Party (SPD), Sigmar Gabriel, accused bankers of “blackmailing governments and states with the (threat) of domino bankruptcy”, of “complicity with criminal activities”, such as tax evasion and money laundering, and of “screwing their own clients”.

Even those commentators who dismissed Gabriel’s banker bashing as political populism agreed that the managers of international private financial corporations have recently done large disservices to their business and their clients.The list of genuine grievances is long:

****For independent economists, such delay in establishing new regulation of an obviously rotten industry is proof of the lack of political will among governments to get to the root of the crisis.“Five years into the worst financial crisis in history, all attempts to regulate banks and funds remain dead letter,” French economist Paul Jorion told IPS. “Despite abundant evidence that (banks and investment funds) cheat all over, again and again, no new rule has been introduced.”

Instead, he added, “the European Union and governments continue to deregulate, pushing their own citizenry into abject misery.”

Reprising the neo-conservative rhetoric of the primary election campaign, former Massachusetts Gov. Mitt Romney Tuesday harshly criticised Barack Obama’s foreign policy but offered few clues as to specific changes he would make if he defeats the president in November....

...critics said they were struck by the absence of specifics and, in some cases, the failure to draw clear differences between him and the president on specific policy issues.

“Both Republicans and Democrats have been waiting for this speech for a long time, calling on him to be policy-specific,” noted Heather Hurlburt, executive director of the National Security Network, a think tank close to the Democratic Party. “What he offered was a lot of neo-conservative rhetoric and still few or no policy specific”....

Judging from the rhetorical flourishes, tone, and some of the policy positions, especially regarding Israel and Iran, it appears clear that the more-hawkish wing of the party remains dominant, with some commentators noting that the speech appeared directed more at the party’s right-wing base than at independents who are likely to decide the election outcome.

Indeed, toward the beginning of his remarks, he reprised the main theme of the major foreign policy address he delivered at a military academy last October in the heat of the primary campaign: “This century must be an American Century,” in which “…we have the strongest economy and the strongest military in the world.”

The “American Century” phrase, which he repeated seven times, harks back to the Project for the New American Century (PNAC), a mainly neo-conservative group whose charter members in 1997 included, among others, Bush’s future vice president, Dick Cheney, defence secretary Donald Rumsfeld, and Middle East aide Elliott Abrams, as well as its two co-founders, Robert Kagan and William Kristol....

He assailed Obama’s “re-set” with Russia, noting that Moscow rewarded the gesture by defending Syrian President Bashar Al-Assad.

Remarkably, however, he had nothing more to say about what policies he would pursue with Russia, which he described as the U.S.’s “number one geo-political foe” only three months ago....

While he did not repeat his threat to declare China a currency manipulator on his first day on his office, he stressed that “the cheating must finally be brought to a stop. President Obama hasn’t done it and won’t do it. I will,” he said.

The European Union has one of the world's most dysfunctional constitutions....

A single currency without central fiscal and regulatory institutions, though, is reviving national tensions in Europe. Moreover, the politics of harsh austerity in countries like Greece are the best friend the enemies of democracy could have.

Martin Essex of the Wall Street Journal flags Dimitri Papadimitriou and Randall Wray’s recent Policy Note on the eurozone, “Euroland’s Original Sin.” The Note traces the root cause of the eurozone’s struggles, including the solvency issues and bank runs in the periphery, to a fundamental design flaw in its setup: national governments gave up currency sovereignty by adopting the euro but retained responsibility for their own fiscal policy.

Essex chooses to focus on a footnote that quotes some early predictions by those associated with the Levy Institute, which is fine. But it’s important to note a couple of things here. First, the point is not that the euro project was predicted to run into trouble in general, but that in these quotations the problems were predicted to flow from a particular structural flaw: the separation between fiscal policy and monetary sovereignty. And this is important for reasons that go beyond a prescience contest. The predictions serve as a useful guide for figuring out what needs to be done to save the euro project

Getting it right isn’t about being able to say “I told you so,” but about having the credibility to say “here’s what should happen next” ....

Essex titles his post “Who Warned About the Euro First?” But the point of the Policy Note (and even of the footnote that forms the basis of Essex’s post) is not to stake some claim on behalf of the quoted authors to being the first to get it right; nor even to claim that only those affiliated with the Levy Institute got it right (hence, Garber). Whether you figured it out the month before Wynne Godley published “Maastricht And All That,” or last Thursday, the point is to understand as clearly as possible what’s going wrong in the eurozone and to use that understanding to help push for solutions—that’s where this conversation needs to go, and that’s where the Policy Note tries to take us.

Next time a media writer, politician, old-line economist or debt-hawk says the federal debt is too high, ask him why he thinks the nation is safer when private bank deposits increase while Federal Reserve Bank deposits decrease. Ask why private banks should borrow more so the federal government’s bank can borrow less.

Neil Wilson comments there: "It’s driving me mad trying to get this very point across. You see the same mistake again and again."

Rodger hits the nail on the head. Privately generated debt is superior to government liabilities?

People ask how government will pay for the national debt and fund future unfunded liabilities, but they never ask about how private debt that exceeds income potential will be paid down.

Governments never have to "pay off their debts" because they just roll over Treasuries as they mature at the going rate, and they fund the interest by issuing more government liabilities. The government is the currency issuer, and there is no backing constraint under a non-convertible floating rate regime. The only constraint is availability of real resources and nominal price level. There is no solvency constraint.

On the other hand, private debt is unsustainable because the private sector has to obtain revenue as a currency user. This introduces a solvency constraint as well as liquidity issues constituting cash flow constraint.

In "Confront and Conceal: Obama’s Secret Wars and Surprising Use of American Power," New York Times reporter David E. Sanger describes in quite extraordinary detail the Obama administration’s hitherto secret cyberwar campaign against Iran, its targeted drone strikes against Al Qaeda and affiliates, and any number of other covert ops, including of course the raid that killed Osama bin Laden. As he indicates in his subtitle, Sanger concludes that the biggest surprise of the Obama presidency is just how aggressive he has been in his application of military power.

But a case can be made that what’s even more surprising is Obama’s abuse of secrecy. Publicly an advocate of government transparency and oversight, Obama has nevertheless hidden the most controversial and unilateral aspects of his presidency — including new ways of waging acknowledged and unacknowledged wars — more thoroughly and effectively than anyone might have imagined.

Sanger’s book, and longtime Newsweek reporter Daniel Klaidman’s new book, "Kill or Capture: The War on Terror and the Soul of the Obama Presidency," shine a bit of light into the darkness, which is good, in that they at least open up the possibility of a national conversation around these issues.

"There could be evolutionary reasons that men and women process female bodies differently, Gervais said, but because both genders do it, "the media is probably a prime suspect."

"Women's bodies and their body parts are used to sell all sorts of products, but we are now for everyday, ordinary women, processing them in a similar way," she said.

Fortunately, the fact that the simple letter-mosaic task swept the effect away suggests that it's an easy habit to overcome, Gervais said. Being in a happy mood is related to global processing, she said, so avoiding blue funks could help you see people in a holistic way, as could simply reminding yourself to step back and look at the bigger picture.

Perception shapes reality and media (culture) shape perception collectively, i.e., this is apparently not an individual phenomenon due to the human hardware or operating system, but rather the cultural programming of an application. That programming can be identified and changed.

Using a lottery to solve a big financial mess may seem surprising today, and misguided puritans - who have no clue about gambling and the "betting human nature" - may object. But lotteries financed some of the biggest, most prestigious projects that still survive around the world.

Revenues from them financed the reconstruction of Rome after Nero burned it down; provided funds for military infrastructure such as the Great Wall of China; financed settlements in the New World, like the Virginia Company; financed the British Museum, the Westminster Bridge, many of England's wars.

Last but not least, Yale, Harvard Princeton, and the University of Pennsylvania were all initially financed by lotteries - though their economics departments today are infested with academics writing endless models and recommending policies based upon them, all drawing on a view of human nature which precludes all gambling, considering buying lotteries "irrational" (since such acts preclude finding internal solutions to some cherished "general equilibrium models", where there is no uncertainty, no financing of risk taking, no governments, no wars - well, nothing that identifies humans).

Yet, throughout history there have only been four methods of voluntary exchange: barter, gift, monetary exchange and, indeed, gambling. Sometimes gambling worked best: which may well be the case today as a potential remedy for settling the housing problem in the US. This prospect is better than either using eminent domain or pursuing monetary policies to boost housing and other asset prices.

Read it at Asia Times OnlineLottery can end homes crisis
By Reuven Brenner, Repap Chair at McGill University's Desautels Faculty of Management, and serves on the Board and Investment Committee of its Pension Fund. The article draws on his World of Chance (Cambridge, 2008, co-authored by Gabrielle Brenner and Aaron Brown) and History - the Human Gamble (Chicago, 1983)

Game theory [competition] or gift society [voluntary cooperation for mutual benefit]? The narcissistic vision of the homo oeconomicus has failed to acknowledge long-documented evidence of the primacy of cooperation. In this Friday essay, Adrian Pabst explores the liberating potential of an anthropologically informed economics for the age of austerity.

Neoliberalism aims for growth as the chief objective based on meritocracy that reward initiative, regardless of distribution. Social liberalism aka modern liberalism and social democracy aim for distributed prosperity based on social justice, recognizing that no one makes it on their own in modern complex society.

Note that the foundation of the universe of discourse is classical liberalism, which provided the intellectual underpinning of the U. S. Constitution. Liberalism traces its history to the Magna Charta in England and to Athenian democracy. The is the meaning of the saying that history has a liberal bias.

The tension within liberalism in general arises socially, politically, and economically from the trifecta of individual freedom, the equality that the rule of law requires, and the exigencies of community and social life. The rule of law and institutional arrangements mediate between individual liberty and social responsibility. Therefore, rule of law and institutional arrangements largely determine the balance of freedom in community. However, the rule of law and institutional arrangements are insufficient. Culture and the level of collective consciousness are also crucial in the balance.

The global economy can never hit a steady state that avoids the increase in complexity as long as population is increasing. One solution is allowing "natural order" to resolve the issue through the eliminationism that results from competition. This is social Darwinism. The other solution is to rise to the challenge together. This is the use of human consciousness and intelligence in a coordinated way.